Organizational Size and Change: Diversification in the Savings and Loan Industry after Deregulation

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Abstract
This paper examines the relationship between organizational size and change. If organizational size indicates political insulation and degree of bureaucratization, then large organizations will change less than small organizations. If organizational size is related to the possession of slack resources, differentiated and decentralized structures, and market power, however, then large organizations will be more fluid than small organizations. I tested these hypotheses by modelling rates of change (expansion into new markets) in a population of savings and loan associations. For three of seven outcomes studied, I found a positive relationship between size and change and concluded that large organizations are more capable of taking advantage of the opportunities to enter new and promising markets than are small organizations, although the advantages of large size sometimes diminish over the range of size. In contrast, for four outcomes, I found an inverted-U-shaped relationship between size and change. These results indicate that both processes-market power and bureaucratization - operate simultaneously but that the market-power process dominates the bureaucratization process.